China's Henan province has a population of about 100 million, larger than that of most countries. It is a prime example of how difficult it is to overestimate the importance of regional issues in China. A province is at the highest level of sub-national government, followed by counties, cities and townships. But even a township in Guangdong province can easily serve a population of 500,000 to 1 million.
The sheer weight of regional populations makes the issue of a migrating workforce enormous. China is divided by nature. Among the large continental countries, including India and Brazil, only China has a small segment of coastline but vast interior regions. This geography has caused some deep regional disparities and is at the root of the migrational issue. Coastal towns with harbours have the advantage over inland settlements and to a large extent this explains the nation's great human migration to the coast.
Although such disparities can have other causes, geography does seem to explain a lot. First of all, it explains why China's coastal regions developed earlier and faster after it launched its market reforms and opened to the world. The ocean is still the cheapest way to transport goods. So the regional disparities in economic prosperity may never narrow - they may often widen. Lanzhou, the capital city of Gansu province in the west, may never catch up with Suzhou, a manufacturing base near Shanghai on the coast.
China's efforts to develop its poorer rural and more wealthy coastal regions more evenly focus on an even two-way flow of traffic in capital and labour between the coastal and interior regions. Financial transfers flow from the coast to the interior through government allocations or other mechanisms, to improve infrastructure like transport and other facilities, make the inland areas more appealing and hold the resident populations in place.
Such investments may not be profitable, but they should be regarded as public goods intended to equalise conditions for growth. China's central government has tried this for the past 10 years through its western development programme. Of course, the government's efforts alone cannot entice industrial investors to "go west", because public infrastructure spending cannot overcome all problems. Without a road you can't transport resources and finished goods. But even with a road you must pay for tolls, petrol, fleet maintenance and other costs - and it can still take five days to get your goods to the coast if you want to export.
The other element in this two-way traffic flow may be even more important. This is the labour flowing in the opposite direction, from west to east, promoting the only economic equality a country can achieve: equality of per capita income, not of GDP. A coastal city that produces more GDP and boasts higher productivity and wages will attract more people to share in its prosperity until "marginal productivity" decreases. As some migrate to the coast, fewer will share the interior regions' resources, causing their per capita income to increase.
But in the real world, if the income gap cannot be narrowed rapidly enough, conditions that enlarge the gap - such as geography - may come to dominate. The good news for China now is that the national five-year plan running to 2015 calls for the government not only to encourage domestic migration between regions, but also to improve the conditions for rural people to settle in cities. Fan Gang is a professor of economics at Beijing University and Chinese Academy of Social Sciences; the director of the National Economic Research Institute; the secretary general of the China Reform Foundation; and a member of the policy committee of the People's Bank of China.
* Project Syndicate